Risk Appetite

Intact is here to protect our clients by assuming risks that they face in their everyday lives. Our commitment is to ensure the sustainability of our activities while delivering on our promises to our stakeholders. To do so, we strive to maintain our financial strength at all times and we take a prudent approach to managing risk while adhering to the following principles.

We focus on our core competencies

We focus our activities on areas where we have a high level of expertise and a thorough understanding of the business, and we will only expand in areas where our core competencies and knowledge provide us with a competitive advantage. While we believe that not growing carries its own risks, rapid growth also has the potential to increase risk. That’s why we recognize the need to grow carefully and will not sacrifice our enterprise value for growth.

We keep our overall risk profile in check

We take a holistic approach to managing risk. To keep our risk profile in check, we use diversification in both our insurance and investment exposures, and retain sufficient capital to address the unexpected. We design our investment strategy based on our overall risk tolerance and expected rates of return while taking into consideration our liability profile and capital structure.

We protect ourselves against extreme events

Because we operate in an environment that can be highly unpredictable and volatile, we protect ourselves against the impact of extreme events such as a large earthquake or a major financial crisis. We develop scenarios and measure their aggregate effects on our business. We then take action to limit these effects, whether by limiting our exposures or by transferring risk to others. In doing so, we help ensure our ability to pay customer claims won’t be compromised even when extreme events occur.

We promote a strong risk culture

All Intact employees are expected to act within the standards and spirit of the Living Our Values document, which outlines that everyone – including the company as a whole – is required to act with integrity and to demonstrate the highest ethical standards of conduct at all times. Management leads by example and its performance is evaluated on principles that exemplify a strong risk culture, such as encouraging an open and honest environment and possessing a deep sense of accountability. Furthermore, the Board of Directors is fully engaged in shaping the philosophy of our enterprise risk management approach, in setting our risk appetite and in ensuring that our governance structure and policies are effective. Both the Board and senior management put risk at the forefront of their decision making process and emphasize the importance of risk awareness throughout the organization.

We maintain our ability to access capital markets at reasonable costs

Access to capital markets is critical to maintain our flexibility to grow and to protect our customers. As a result, we manage our business and our balance sheet in a way that allows us to maintain ready access to these markets at a reasonable cost. Our financial leverage target takes into consideration our risk exposures and profitability goals, we structure our debt maturities to avoid large concentrations, and we maintain appropriate liquidity to absorb fluctuations in cash flow requirements. We also believe transparency in our communications is an important aspect of minimizing surprises to the investor community and maintaining confidence in our ability to be good stewards of capital.

We put these principles into action in the following areas of risk that our business faces.

Insurance risk

We operate in markets and product lines where our expertise, discipline and management processes give us a competitive advantage. We expect these attributes to provide us with a better risk-reward profile than the industry. We use reinsurance to protect our capital base and reduce the volatility of our results. That said, if the risk inherent in one of our businesses jeopardizes its profitability, we’ll make the necessary adjustments, including exiting the business in extreme cases. One of our strengths and core competencies is the ability to understand risk and price it accordingly, thanks to our actuarial skill, underwriting expertise and extensive database. Our multi-channel distribution platform makes it easier for our customers to acquire our products through their preferred method while allowing us to reduce the risk associated with changing purchasing patterns. Our claims professionals treat our customers with respect and provide a fair claims experience. Regular audits are performed on both their quality of service and accuracy of settlement.

Investment risk

Our investment portfolio is managed by a dedicated internal team, Intact Investment Management, which provides us with the ability to structure our investment portfolios according to our own specific needs. Managing our assets internally also gives us more transparency on our investments and allows for deeper involvement of senior management in the design and monitoring of the investment strategies. Furthermore, we choose investment risk levels that best support our risk-return expectations considering our liability profile and capital structure. We don’t allow those risk levels to threaten solvency in stress testing scenarios.

Operational risk

Our people

We strive to achieve high levels of employee engagement, which helps us accomplish our objectives and navigate through any periods of financial, reputational or operational challenges. Investing in our people, especially through the maintenance of a solid talent management strategy, is a priority for us and helps to promote a high-quality, high-performance workforce.

Our processes

We rely on focus and discipline to control the risks associated with our operations. From promoting continuous process improvement to ensuring that adequate resources are available for business projects, our management team ensures that the quality of execution reflects our commitments.

Our systems

We invest significant amounts in maintaining and upgrading the technology that supports our business, which helps ensure that we are able to serve our customers and brokers as efficiently as possible to further our competitive advantage. We also maintain crisis management, business continuity and disaster recovery plans to address the wide range of events that could impact our ability to deliver on our promises to stakeholders.

Reputation Risk

Our reputation is paramount to us; it is our license to operate. To protect and strengthen our reputation, we have established a comprehensive risk management framework, which includes the monitoring and identification of trends and situations that may negatively impact the company’s reputation. We also promote a culture of compliance and ethical business conduct among our employees.